Nvidia’s third-quarter results calm investor worries over AI bubble

Nvidia reported strong third quarter results yesterday, easing Wall Street’s fear of an AI bubble. The company posted record revenue of $57 billion, up 62% from last year and above expectations.

CEO Jensen Huang declared that the company has entered a “virtuous cycle of AI,” as demand for its data center chips—especially the Blackwell GPUs—continues to surge.

Data center revenue hit $51.2 billion, smashing analyst estimates of $49.09 billion.

For the current quarter, the company is expecting $65 billion in revenue.

Nvidia’s stock rose 6.5% in after-hours trading Wednesday.

The strong report came at a crucial moment
Over the past few weeks, investors had grown anxious that tech companies were overspending on AI infrastructure. In a recent Bank of America survey, roughly 45% of global fund managers called the AI bubble a top market risk.

Several high-profile investors—including Japan’s SoftBank, venture capitalist Peter Thiel’s fund, and Big Short investor Michael Burry—sold or bet against Nvidia.

Still, Nvidia’s stock is up about 30% this year, and it was the first publicly traded company to surpass a $5 trillion valuation in October.

But tech companies are tightly knit
Amazon, Alphabet, and Meta make up 40% of Nvidia’s sales.

Several analysts point to the circular nature of the AI deals among OpenAI, Nvidia, CoreWeave, AMD, Microsoft, and Oracle, where each investment feeds into the others.

Around 75% of the S&P 500’s gains since October 2022 have been held up by the Magnificent Seven stocks, and these companies have invested billions into AI.

This has some analysts worried that if these companies pull back on spending, it could negatively affect the industry and the economy.

In other chip-related news, the Commerce Department recently approved the sale of up to 70,000 advanced AI chips to UAE- and Saudi-backed companies, opening major new markets in the Middle East.